This quiz works best with JavaScript enabled. Home > Finance > International Finance > International Finance – Quiz 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books International Finance Quiz 4 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. The agency costs of an MNC are likely to be higher if it A) Scatters its subsidiaries across many foreign countries. B) Decreases its volume of international business. C) Uses a centralized management style. D) B and C. Show Answer Correct Answer: A) Scatters its subsidiaries across many foreign countries. 2. U9V-9) Prohibits all trade with people and businesses in a specific country, done for political reasons A) Embargo. B) Tariff. C) Subsidy. D) Quota. Show Answer Correct Answer: A) Embargo. 3. Which of these is NOT a model of Multinational Company? A) Local. B) Multinational. C) Regional. D) Centralized. Show Answer Correct Answer: A) Local. 4. U9V-6) Government policies that restrict or stop the flow of goods and services among countries. A) Shortage. B) Scarcity. C) Trade. D) Trade Barrier. Show Answer Correct Answer: D) Trade Barrier. 5. What does the Financial Account refer to? A) Transactions involving short-term financial assets between countries. B) New direct foreign investment over a given period. C) New portfolio investment over a given period. D) Special types of investment including DFI and portfolio investment. Show Answer Correct Answer: D) Special types of investment including DFI and portfolio investment. 6. Special Drawing Rights (SDR) are: A) An artificial international reserve allotted to the members of the International Monetary Fund (IMF), who can then use it for transactions among themselves or with the IMF. B) A "portfolio" of currencies, and its value tends to be more stable than the currencies that it is comprised of. C) Used in addition to gold and foreign exchanges, to make international payments. D) All of the above. Show Answer Correct Answer: D) All of the above. 7. $\epsilon^{PPP}>\epsilon$ A) Domestic country is more expensive than foreign country = foreign currency is undervalued. B) Domestic country is less expensive than foreign country = foreign currency is overvalued. C) Foreign country is more expensive than foreign country = domestic currency is undervalued. D) None of above. Show Answer Correct Answer: A) Domestic country is more expensive than foreign country = foreign currency is undervalued. 8. Assume a two-country world:Country A and Country B. Which of the following is correct about purchasing power parity (PPP) as related to these two countries? A) If Country A's inflation rate exceeds Country B's inflation rate, Country A's currency will weaken. B) If Country B's inflation rate exceeds Country A's inflation rate, Country A's currency will weaken. C) If Country A's interest rate exceeds Country B's inflation rate, Country A's currency will strengthen. D) If Country A's interest rate exceeds Country B's inflation rate, Country A's currency will weaken. Show Answer Correct Answer: A) If Country A's inflation rate exceeds Country B's inflation rate, Country A's currency will weaken. 9. Covered interest arbitrage (CIA) activities will result in A) An unstable international financial market. B) A disintermediation. C) Restoring equilibrium quite quickly. D) No effect on the market. Show Answer Correct Answer: C) Restoring equilibrium quite quickly. 10. What does the listed price indicate? A) How many currencies do you have to get 1 USD. B) How much is 1 unit of foreign currency worth in USD. C) How many units of foreign currency are needed to get 1 unit of local currency. D) How many units of local currency do you need to exchange for 1 unit of foreign currency. Show Answer Correct Answer: C) How many units of foreign currency are needed to get 1 unit of local currency. 11. THE CONFERENCE WHICH GIVE SHAPE TO IMF IS NAMES AS A) Bretton Woods Conference. B) Vretton Woods Conference. C) Vretton Hoods Conference. D) Bretton Hoods Conference. Show Answer Correct Answer: A) Bretton Woods Conference. 12. The least risky method by which firms conduct international business is: A) International Trade. B) The establishment of new subsidiaries. C) Franchising. D) The acquisitions of existing operations. E) Licensing. Show Answer Correct Answer: A) International Trade. 13. Tax placed on imported goods that will generate revenue without prohibiting imports A) Quota. B) Balance of payments. C) Revenue tariff. D) The trade fails. Show Answer Correct Answer: C) Revenue tariff. 14. International Finance discusses the issues related with ..... interactions of at least two or more countries. A) MONETARY. B) LEGAL. Show Answer Correct Answer: A) MONETARY. 15. Transaction banks using USD, listing US prices (indirect listing) means: A) Using the British pound as the quote currency. B) Get a foreign currency quote. C) Using the USD as a quote currency. D) Using USD as listing currency. Show Answer Correct Answer: D) Using USD as listing currency. 16. Forward contracts: A) A) contain a commitment to the owner, and are standardised. B) B contain a commitment to the owner, and can be tailored to the desire of the owner. C) C) contain a right but not a commitment to the owner, can be tailored to the desire of the owner. D) D) contain a right but not a commitment to the owner, and are standardised. Show Answer Correct Answer: B) B contain a commitment to the owner, and can be tailored to the desire of the owner. 17. If a firm is due to be paid in deutsche marks in two months, to hedge against exchange rate risk the firm should A) Sell foreign exchange futures short. B) Buy foreign exchange futures long. C) Stay out of the exchange futures market. D) None of the above. Show Answer Correct Answer: A) Sell foreign exchange futures short. 18. Fixed exchange rate regime A) There are no forex reserve changes. B) Can change as a result of changes in the domestic credit. C) Can change as a result of changes in the forex reserves. D) Can change as a result of changes in the forex reserves or domestic credit or both. Show Answer Correct Answer: D) Can change as a result of changes in the forex reserves or domestic credit or both. 19. International organization that settles trade disputes and organizes trade negotiations A) United Nations (UN). B) World Trade Organization (WTO). C) European Union (EU). D) North America Free Trade Agreement (NAFTA). Show Answer Correct Answer: B) World Trade Organization (WTO). 20. Such stocks are issued for a single company. A) Common. B) Dual class. C) Preferred. D) Treasury. Show Answer Correct Answer: B) Dual class. 21. Goods and services that a country produces and then sells to other countries A) Imports. B) Exports. C) Absolute advantage. D) Comparative advantage. Show Answer Correct Answer: B) Exports. 22. According to the international Fisher effect (IFE): A) The percentage change in the foreign spot exchange rate will be positive if the foreign interest rate is higher than the local interest rate. B) The exchange rate-adjusted rate of return on a foreign investment should be equal to the interest rate on a local money market investment. C) The percentage change in the foreign spot exchange rate will be negative if the foreign interest rate is lower than the local interest rate. D) The nominal rate of return on a foreign investment should be equal to the nominal rate of return on the domestic investment. Show Answer Correct Answer: B) The exchange rate-adjusted rate of return on a foreign investment should be equal to the interest rate on a local money market investment. 23. If the interest rate in the United Kingdom is 9% and the interest rate in the U.S is 5% approximate premium on the British pound forward rate should 3%? A) False. B) True. Show Answer Correct Answer: A) False. 24. The current interest rate on a Euro Yen loan is 6%/year (annual compound interest) and the interest rate on a Euro USD loan is 8.5%/year. What is the premium or discount of a 5-year European yen forward contract? A) Compensation 4.17%. B) Compensation 12.36%. C) 11.00% discount. D) 18.46% discount. Show Answer Correct Answer: C) 11.00% discount. 25. Uncovered Interest Rate Parity A) $\left(1+r\right)=\left(1+r^{\cdot}\right)\left(\frac{S}{F}\right)$. B) $\left(1+r\right)=\left(1+r^{\cdot}\right)\left(\frac{F}{S}\right)$. C) $\left(1+r\right)=\left(1+r^{\cdot}\right)\left(\frac{S}{S^e}\right)$. D) $\left(1+r\right)=\left(1+r^{\cdot}\right)\left(\frac{S^e}{S}\right)$. Show Answer Correct Answer: D) $\left(1+r\right)=\left(1+r^{\cdot}\right)\left(\frac{S^e}{S}\right)$. 26. Assume you are holding Treasury securities and have sold futures to hedge against interest rate risk. If interest rates fall A) The increase in the value of the securities equals the decrease in the value of the futures contracts. B) The decrease in the value of the securities equals the increase in the value of the futures contracts. C) Both the securities and the futures contracts increase in value. D) Both the securities and the futures contracts decrease in value. Show Answer Correct Answer: A) The increase in the value of the securities equals the decrease in the value of the futures contracts. 27. How many types of international arbitrage are there? A) 2. B) 3. C) 4. D) 1. Show Answer Correct Answer: B) 3. 28. Prior to the 1870s, both gold and silver were used as international means of payment and the exchange rates among currencies were determined by either their gold or silver contents. Suppose that the dollar was pegged to gold at $ 30 per ounce, the French franc is pegged to gold at 90 francs per ounce and to silver at 6 francs per ounce of silver, and the German mark pegged to silver at 1 mark per ounce of silver. What would the exchange rate between the U.S. dollar and German mark be under this system? A) 1 German mark = $ 1. B) 1 German mark = $ 2. C) 1 German mark = $ 45. D) 1 German mark = $ 0.50. Show Answer Correct Answer: B) 1 German mark = $ 2. 29. 3 Functions of money are ..... A) Medium of exchange. B) Store of value. C) Unit of account. D) All of the above. Show Answer Correct Answer: D) All of the above. 30. ..... are most commonly classified as a direct foreign investment. A) Purchases of international stocks. B) Licensing agreements. C) Foreign acquisitions. D) Exporting transactions. Show Answer Correct Answer: C) Foreign acquisitions. ← PreviousNext →Related QuizzesFinance QuizzesInternational Finance Quiz 1International Finance Quiz 2International Finance Quiz 3International Finance Quiz 5International Finance Quiz 6International Finance Quiz 7International Finance Quiz 8International Finance Quiz 9International Finance Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books